Prime Time for Paul Ryan’s Guru (the One Who’s Not Ayn Rand)

As Paul Ryan and Mitt Romney take the stage in Tampa next week, the ghost of an Austrian economist will be hovering above them with an uneasy smile on his face. Ryan has repeatedly suggested that many of his economic ideas were inspired by the work of Friedrich von Hayek, an awkwardly shy (and largely ignored) economist and philosopher who died in 1992. A few years ago, it was probably possible to fit every living Hayekian in a conference room. Regardless of what happens in November, that will no longer be the case.

Hayek’s ideas aren’t completely new to American politics. Some mainstream Republicans, including Ronald Reagan, have name-checked him since at least the 1980s as a shorthand way of signaling their unfettered faith in the free market and objection to big government. But few actually engaged with Hayek’s many contentious (and outré) views, particularly his suspicion of all politicians, including Republicans, who claim to know something about how to make an economy function better. For these reasons, and others, Hayek has become fashionable of late among antigovernment protesters, and if Ryan brings even a watered-down version of his ideas into the Republican mainstream, the country’s biggest battles about the economy won’t be between right and left, but within the Republican Party itself — between Tea Party radicals who may feel legitimized and the establishment politicians they believe stand in their way.

For the past century, nearly every economic theory in the world has emerged from a broad tradition known as neoclassical economics. (Even communism can be seen as a neoclassical critique.) Neoclassicists can be left-wing or right-wing, but they share a set of crucial core beliefs, namely that it is useful to look for government policies that can improve the economy. Hayek and the rest of his ilk — known as the Austrian School — reject this. To an Austrian, the economy is incomprehensibly complex and constantly changing; and technocrats and politicians who claim to have figured out how to use government are deluded or self-interested or worse. According to Hayek, government intervention in the free market, like targeted tax cuts, can only make things worse.

Many of Ryan’s most famous proposals have clear Hayekian roots. His Roadmap for America’s Future includes calls for government to step out and let the market decide. His proposal to allow citizens to buy whatever health insurance they want, rather than use a government-promoted exchange, also seems to be embedded in the Austrian tradition. In other important ways, though, Ryan is anything but Austrian. While Hayek would laugh at an economic forecast for distant 2013, Ryan’s budget plan includes predictions about 2083. The congressman’s proposal for two separate tax systems — a flat-tax system and a loophole-filled tax system — is exactly the sort of contradictory governmental problem-solving that Hayek detested.

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Friedrich von HayekCredit
Associated Press

In actuality, Ryan is like a lot of politicians who merely cherry-pick Hayek to promote neoclassical policies, says Peter Boettke, an economist at George Mason University and editor of The Review of Austrian Economics. “What Hayek has become, to a lot of people, is an iconic figure representing something that he didn’t believe at all,” Boettke says. For example, despite his complete lack of faith in the ability of politicians to affect the economy, Hayek, who is frequently cited in attacks on entitlement programs, believed that the state should provide a base income to all poor citizens.

To be truly Hayekian, Boettke says, Ryan would need to embrace one of his central ideas, known as the “generality norm.” This is Hayek’s belief that any government program that helps one group must be available to all. If applied, Boettke says, a Hayekian government would eliminate all corporate and agricultural subsidies and government housing programs, and it would get rid of Medicare and Medicaid or expand them to cover all citizens. (Hayek had no problem with a national health care program.) Hayek also believed that the government should not have a monopoly on any service it provides; instead, private companies should compete by offering an alternative Postal Service, road system, even, perhaps, a private fire department.

Because his ideas seem almost willfully designed to alienate every constituency, this is not going to be the year — no matter what kind of enthusiasm Paul Ryan whips up among the Tea Party faithful — that they will become central to the Republican platform. “I’m quite sure I’ve never heard any view of Mitt Romney’s about Hayek,” Greg Mankiw, one of Romney’s lead economic advisers, told me. But elements of Hayek’s ideas will be valuable to those trying to build their influence outside the mainstream right. Tea Party favorites, like Senator Mike Lee of Utah and the Senate candidate Ted Cruz of Texas, appear to have developed a deeper commitment to the Austrians. Wayne Brough, an economist for FreedomWorks, the Tea Party-friendly activist group, told me that the group’s goal is to eventually fill Congress with Hayekians. And Bruce Caldwell, the author of the intellectual biography “Hayek’s Challenge,” said he hoped that we were experiencing, partly through Ryan’s ascendancy, the first stage of a slow but steady embrace of Hayek’s philosophy.

It may sound crazy, but it would not be the first time that once-fringe ideas entered mainstream party politics. Most economists and politicians dismissed the ideas of the British economist John Maynard Keynes in the 1930s, but by the 1950s they became the reigning orthodoxy for both parties. (Eisenhower and Nixon were Keynesians.) In the 1960s, a group of free-market-­oriented economists at the University of Chicago developed a critique of Keynes that was ignored for years. But in the 1980s, after Reagan’s election, the Chicago approach came to dominate economic discussion on the right and even held sway among many Democrats until the financial crisis of 2008. Since then, there has been a bit of a free-for-all. Keynesian ideas have come to dominate much of the academic and policy world, but the Occupy and Tea Party movements make clear that there is increasing interest in previously ignored radical ideas.

Several activists and groups, including FreedomWorks, say they hope to turn the inchoate anger of the Tea Party into a focused pro-Hayek movement that would either take over the Republican Party or create a new one. That is a huge task. Nobody (not even Hayek) has ever taken his abstract, philosophical writings and constructed an actual plan for governance. Do you eliminate all those government agencies on the same day? How much should the government-issued base salary for all citizens be? And how exactly do you make plans for the future if you don’t believe in economic forecasts? There are countless practical issues, all of which are likely to spur intense argument, especially because other Tea Party favorites, like Ayn Rand and Milton Friedman, often disagreed with Hayek (Rand once called him “pure poison”) and with one another on fundamental issues.

When I asked Boettke and Caldwell how they vote, they gave the same answer. They just root for gridlock: a divided Congress in a prolonged stalemate with the White House (so far, so good). They feel that, with our system, the most Hayekian thing they can hope for is a government incapable of doing anything. But they both agreed that if Hayekians do someday take over, the changes will be significant. Caldwell corrects people when they refer to Hayek as a conservative. Hayek didn’t want to conserve anything. And while that’s exactly what the most radical may want, it’s probably not the easiest policy to build a party around.

Adam Davidson is co-founder of NPR's “Planet Money,” a podcast, blog and radio series heard on “Morning Edition,” “All Things Considered” and “This American Life.”

A version of this article appears in print on August 26, 2012, on page MM18 of the Sunday Magazine with the headline: Made in Austria. Today's Paper|Subscribe